Thailand and asked him whether he sees rates going up soon.
Well, I think, look, the framework that we're looking at and have been looking at for a while now hasn't changed. So we've got the impact, obviously, of the events in the Middle East, the direct impact on energy prices, that's very visible. It's going on longer. Clearly, we're seeing that. It's not a statement, nothing but a statement, I'm afraid, of fact. The key thing that we have to look at is what are called pass-through into the indirect effects and the second-round effects. Now, so far it's been more subdued in the UK, which I find encouraging. But the longer this goes on, the harder it gets. Two of the things I'd say: one, and I think the IMF have pointed to this this morning in their World Economic Outlook, we are seeing greater resilience in UK economic activity, which is good. We will obviously factor that in. Alongside that, when I go around the country and I do a lot of talking to firms and my colleagues do, there's a very big focus on cost containment in terms of, you know, when they're looking at the increase in their costs, can they pass it on? Do they have to cut costs? Cutting costs is a big theme of the conversations I have.
That's a double-edged sword, of course, because the moment you start cutting costs, it slows things down.
Yeah, yeah, yeah. You're losing, you're affecting the labour market and so on.
Yes, exactly. I guess on monetary policy, is it a case of when, not if, in terms of a tightening?
Well, look, I'm not—that would obviously be a leading question. Nice of you to do it. I entirely, totally appreciate that. That's the framework that I'm sure we will be going into the next round with. What I would say is, I've said a number of times that the longer this energy situation goes on, even though we're seeing subdued pass-through so far, the harder it gets.
Are you surprised at the subdued second-round effects?
Well, it's early days still. I mean, the other thing I would say is second-round effects come with a lag, so it's early days. But I am seeing this very clear message that I get from UK businesses that cost control is something they are focused on. They feel they've got to be focused on because they're finding it very difficult to pass on prices. But as I say, the longer the energy thing goes on, the harder that gets, and that puts pressure on the second-round effects.
The issue, of course, we've got the budget coming up as well, which is another area that you will...
Oddly enough, I will not be commenting on it.
No, but you have put out a clarion call with your warning. You want a credible fiscal policy, and that begs the question: what do you mean by credible?
Well, can I say that was in the context of a global point, actually? Yes, because, you know, I was commenting on really what we're seeing in bond markets, which of course is another big theme, and it's going to be a big theme this week in Bangkok at the IMF Annual Meetings, I'm sure. And really, you know, I was making three points in terms of what I see as the underlying things that we have to look at. One is growth, because there's no question that in terms of what can alleviate the fiscal situation, which again the IMF are pointing to, is stronger growth. The second one is having macroeconomic frameworks and keeping to them, which is both monetary and fiscal. So our job is to bring inflation back to target. We will do that. But fiscal frameworks are important there. And the third point, which again is very much in our domain, which is a financial stability point, is that the structure of government bond markets has changed. There's far more leveraged finance in it. There's far more price-sensitive investment in it, and there are certain fragilities in that situation.
Do you fear that there is a budget or a bond yield crisis about to hit France that could affect everybody, that they are heading into a dangerous scenario?
Again, I'm going to avoid sort of, you know, leading comments on other countries because that's not for me. I think the point about fiscal frameworks holds, and I think it is interesting because, again, if you look at what the IMF is putting out today and you look at the points they're making about fiscal outlooks, you know, the UK has a budget profile which does have a declining deficit in it. And of course, that's important from the point of view of the overall position, the debt position. So, you know, that's important. And I think, you know, I support strongly what the IMF is saying here that this is obviously a concern if you look globally.
I think, I suppose, if I sort of helicopter up a bit, because we can always talk about the individual. The macro scenario does not look good globally at the moment. To use the phrase that your bank has used, the risks are very firmly...
